Exxon Mobil denied hearing over Canada research

JOE SCHNEIDER, Bloomberg News

Published
6:30 am CST, Thursday, February 19, 2009

Exxon Mobil Corp., Chevron Corp. and others involved in offshore oil production in eastern Canada lost a bid for a hearing before the country’s top court challenging a 2004 order requiring them to spend more on research.

Canada’s Supreme Court today denied the companies’ request appealing the order, which they say will cost millions of dollars. The court gave no reason for its decision.

Hibernia Management & Development Co., a consortium of oil companies, produce about 162,000 barrels per day from the oil field, located 315 kilometers (196 miles) southeast of St. John’s, Newfoundland.

The companies’ development plans were approved in 1986 and 1997 and didn’t set out specific expenditure requirements. That changed in 2004 when the Canada-Newfoundland Offshore Petroleum Board, a government body overseeing offshore operations, required the companies to spend a percentage of production on research.

“The guidelines require investors to pay any moneys assessed that could not be spent on research and development into a fund,” Exxon Mobil said in a separate 2007 lawsuit accusing Canada of breaching the North American Free Trade Agreement by imposing the requirement. “If not rescinded, the guidelines’ violation of the NAFTA will cause damage in excess of $40 million to the disputing investor,” Exxon Mobil said.

Hibernia Management accepts the Supreme Court decision and will work with the board to meet the requirements, Margot Bruce- O’Connell, spokeswoman for the consortium, said in a telephone interview.

“It is disappointing, however, that the new spending requirements were put in place after the project was sanctioned,” she said. “Commercial and fiscal stability are important to investors.”

The NAFTA suit remains outstanding, Bruce-O’Connell said. Exxon Mobil is willing to work with the Canadian government to resolve the dispute, she said.